United’s Deal to Insure Domestic Workers Faces Protest

Seven other insurance companies complain about original bid

United Insurance

Seven insurance companies are protesting the recent award given to United Insurance to provide coverage to an estimated one million domestic workers traveling to the Middle East.

The companies lodged their complaint two weeks ago with the Ministry of Labour & Social Affairs, questioning the legitimacy of the procedure followed by the Ministry in awarding the contract to United. United was notified on the award of the project, estimated to be close to 385 million Br, on October 31, 2018.

The Ministry tendered a coverage of full life insurance for domestic workers which includes coverage for natural death, suicide and funeral expenses of insured clients in a bid announced in September. The bid also insures for bodily harm, psychological trauma and rape. The bid was re-tendered after it was canceled last June due to the unavailability of a legal framework for overseas employment.

In the bid, the Ministry has set the minimum coverage of 300,000 Br for natural death and 350,000 Br for bodily harms.

Ten local insurance firms in the country that offer life insurance coverage services were approached to submit their bids. Seven, including Ethio Life & Insurance, Nib, Awash, Ethiopian Insurance Corporation, Nile, Oromia and Nyala submitted their offers to the Ministry. During the process, Oromia Insurance was disqualified as its long-term insurance service is less than a decade old, one of the criteria in the tender announcement.

United, which offered a premium of 385 Br for each covered individual, was announced the winner two weeks ago. United operates with 40 branches, 24 of which are in the capital. It also uses the 229 branches of United Bank to sell its insurance.

“The bid was ambiguous and odd as it doesn’t set a limit to either the premium or the amount insured,” claims Mengistu Meharu, deputy CEO of Ethio Life & General Insurance, one of the insurance firms that filed their complaint. “It was better if the Ministry set a ceiling on the coverage.”

Nyala Insurance also claims that the company was expecting multiple winners.

“During the opening, we were informed that at least five companies would be awarded the project,” said Tegegn Masresha, marketing and business development executive of Nyala.

The Ministry is reviewing their complaint, according to Eshetu Yitna, head of diaspora affairs at the Ministry.

“We will notify them of the result of our review in due time,” Eshetu told Fortune.

The agreement was scheduled to be signed between United and the Ministry two weeks ago.

Officials of United are disappointed by the delay, arguing they have secured the project according to the terms of the bid process.

“We all had the same chance,” said an official at United Insurance. Last year the firms collected close to 14 million dollars in premiums for life insurance policies.

A logistics and supply chain management expert and a lecturer at Addis Abeba University for the past decade argues that the Ministry was supposed to state its evaluation criteria when it announced the tender.

“It will be good if the bidding committee scrutinise the tender and the complaints of the companies,” said Busha Temesgen (PhD).

The insurers have also requested the intervention of the Ethiopian Insurers Association in the case.

“The Association can lay out a standard that can benefit all of us and the insured,” Mengistu told Fortune.

The Ministry is expecting to formally kick off overseas employment, which has been banned for the past five years and was resumed last month. So far, the Ministry has signed a bilateral labour agreement between the governments of Saudi Arabia, Qatar and Jordan, and has selected over 142 employment agencies.

Ergoge Tesfaye (PhD), minister of Labour & Social Affairs, confirmed that the issue will be resolved very soon.

“The procurement is done according to the directive of the Ministry,” Ergoge told Fortune. “But as the companies challenged the directive itself, we are looking into it.”